Former Nikola CEO charged with fraud

US Federal Attorneys on Thursday announced that they had charged billionaire entrepreneur Trevor Milton with three counts of securities and wire fraud, each of which carries a maximum sentence of 20-25 years in prison.

"We charge that Milton engaged in a scheme to enrich himself by making false and misleading statements to investors," said US Attorney for the Southern District of New York Audrey Strauss as she publicly announced the charges against the founder and former CEO of the green-vehicle company Nikola.

At the time, Milton was trying to drum up investor interest as Nikola prepared to launch on the stock markets, before it was in a position to bring in any revenues from vehicle sales. 

"In order to drive investor demand for Nikola's stock, Milton lied about nearly every aspect of the business," continued Strauss, whose office prepared the 49-page, three-count indictment. The indictment says the scheme occurred between November 2019, when he sought to take Nikola public, and September 2020, when he resigned as news of the investigations against him first surfaced.

What is Trevor Milton accused of?

Milton is accused of having "brazenly and repeatedly used social media, and appearances and interviews on television, podcasts, and in print, to make false and misleading claims about the status of Nikola's trucks and technology," according to Strauss — namely lying to investors about the true status of a prototype semi-truck that he claimed was "fully functional" when he knew it to be inoperable.

The billionaire businessman's claims targeted novice retail investors with no experience in the securities markets, including some who took up trading during the pandemic to make ends meet or to occupy themselves during the lockdown, according to the indictment.

Some investors were defrauded of their life savings. Prosecutors say Milton was motivated by greed, wanting to "enrich himself and elevate his stature as an entrepreneur" in order to fulfill his dream of becoming one of the world's 100 richest people.

Nikola had positioned itself as a sort of heavy-duty answer to Elon Musk's Tesla, even using the other half of renowned scientist Nikola Tesla's name, as the company looked to go public while Tesla's stock was soaring. 

What do Milton and his lawyers say? 

Lawyers for Milton said, "Trevor Milton is innocent; this is a new low in the government's efforts to criminalize lawful business conduct." Both Milton and his lawyers claim he is the victim of a "faulty and incomplete investigation" and that he will be "exonerated."

"Trevor Milton is an entrepreneur who had a long-term vision of helping the environment by cutting carbon emissions in the trucking industry. Mr. Milton has been wrongfully accused following a faulty and incomplete investigation in which the government ignored critical evidence and failed to interview important witnesses," according to a statement released by the defendant's legal team.

Milton was taken into custody shortly Thursday and released on $100 million (€84.1) bond after arraignment. The Utah businessman pleaded not guilty to the charges.

Federal securities laws also apply on social media, says SEC

The US Securities and Exchange Commission (SEC) filed related civil charges on Thursday as well, with SEC Director of Enforcement Gurbir Grewal noting, "Corporate officers cannot say whatever they want on social media without regard for the federal securities laws," as he spoke alongside Strauss. 

Grewal, too, said that Milton had targeted novice investors, painting himself as a "different" kind of CEO, again in a manner rather reminiscent of Tesla's Musk.

How did Milton get tripped up?

Milton's undoing came shortly after what had looked like one of his biggest coups, namely winning auto giant General Motors as a partner shortly after taking Nikola public via special-purpose acquisition company (SPAC). 

However, a report by Hindenburg Research just two days after the GM deal was announced said that Nikola's fairytale success was based on "an ocean of lies." The report alleged that Milton's "intricate fraud" went so far as to release videos of non-motorized prototypes rolling downhill to give the impression they were driving under their own power. 

"We commend regulators for acting expediently to protect investors and hold Milton accountable for his egregious lies," said Hindenburg founder Nathan Anderson in a statement.

Nikola, which initially denied the accusations in the Hindenburg report, was not charged in any of the accused crimes and publicly stated that it had cooperated with federal attorneys. "Today's government actions are against Mr. Milton individually, and not against the company," Nikola said in a statement."

Nevertheless, Nikola shares dropped 11% in afternoon trading to $12.63, or just over one quarter of its peak value in August 2020, a month before Milton's resignation.

js/msh (AFP, AP, Reuters)